Infrastructure Canada proceeded with a public-private partnership for the new Champlain Bridge with an evaluation based on incomplete information and analyses, Federal Auditor Michael Ferguson stated in his Spring 2018 report released on 29 May.
Before deciding on a P3 for a project, federal organizations in Canada are required to perform qualitative and value-for-money analyses considering alternative delivery models. Ferguson’s report found that the government selected the P3 model in 2011, before it had completed the mandatory analyses.
The two reports, completed in 2014, found that the studies were incomplete because they did not examine previous construction projects, nor did they analyze other possible forms that a P3 model could take. Additionally the studies failed to assess the high variability of projected construction costs, incorrectly estimated project management costs (first predicted to cost CAD 16m in 2014, then revised to CAD 159m in 2015), misguided elements considered in their risk analysis and using an inflated discount rate in their analyses.
“In our view, the value-for-money analyses were of little use to decision makers because they contained many flaws favoring the P3 model,” the report says. The original value-for-money analyses concluded that using the P3 model would save CAD 227m, and a later-revised report adjusted that figure to about CAD 1.5bn. The Auditor General said that Infrastructure Canada was “unable to fully explain the [difference]. In our view, the Department’s analyses indicated savings that were unrealistic.”
Ferguson added that he believes the project will not be delivered on budget, and meeting the construction completion date of 21 December 2018 appears “very challenging.” Already, delays in the bridge development have cost the Canadian government over CAD 500m (USD 388m), according to the spring 2018 report.
Additionally, Ferguson’s report argued that the government’s evaluation approach for the bidders’ technical proposals contained flaws that introduced major risks. “We found that the [government] did not verify whether proposals demonstrated that all important technical requirements had been met. The evaluation approach did not require it to do so.”
Infrastructure Canada did not respond to questions by press time.
Ferguson’s report argued that the government delayed its decision to replace the existing bridge with a new one, after several organizations – including the Jacques Cartier and Champlain Bridges Inc. (JCCBI) – alerted the government to major structural issues with the existing bridge. The JCCBI is a crown corporation with the mandate to operate and maintain several federal structures in Montreal.
The JCCBI found that the bridge, now over 50 years old was deteriorating more quickly than anticipated because it was not resistant to salt corrosion and not fit to handle the volume of heavy truck traffic using the bridge since the 1990s.
The JCCBI initially raised concerns about the issues in 2004, which were “abnormal for a bridge of that age” and the maintenance costs increased faster than they were first planned, according to the report. The Minister of Transport announced the need to replace the bridge in 2008, but the plan to move ahead with the bridge replacement did not occur until 2011.
The Auditor General argued that “a new bridge could have been delivered by early 2015 if the JCCBI had provided timely information to Transport Canada, indicating the need to replace the existing bridge.”
The report said the delays in planning, communicating and deciding caused “avoidable government expenditures” of over CAD 500m: CAD 306m for major repairs to the existing bridge and CAD 235m to the private partner for additional resources.
A consortium led by SNC-Lavalin, HOCHTIEF and Grupo ACS reached financial close on the project in June 2015. Design and construction costs for the bridge tallied to CAD 2.25bn, with the total lifecycle costs for the project amounting to CAD 4.24bn.
The consortium is expected to operate and maintain the bridge for a 30-year period following substantial completion.